Life-Cycle Variation in the Association between Current and Lifetime Earnings

Steven Haider; Gary Solon

doi:10.1257/000282806779468508

Life-Cycle Variation in the Association between Current and Lifetime Earnings

Steven Haider^1,2,3; Gary Solon^1,4,2

¹ National Bureau of Economic Research · ² Society of Exploration Geophysicists · ³ Michigan State University · ⁴ University of Michigan–Ann Arbor

American Economic Review 2006

Researchers in a variety of important economic literatures have assumed that current income variables as proxies for lifetime income variables follow the textbook errors-in-variables model.In an analysis of Social Security records containing nearly career-long earnings histories for the Health and Retirement Study sample, we find that the relationship between current and lifetime earnings departs substantially from the textbook model in ways that vary systematically over the life cycle.Our results can enable more appropriate analysis of and correction for errors-in-variables bias in a wide range of research that uses current earnings to proxy for lifetime earnings.

DOI: 10.1257/000282806779468508
Volume: 96 (4)
Pages: 1308-1320
Language: en
Export: BibTeX
Sources: openalex crossref